Braintree, a Chicago-based payment gateway provider, has been searching around recently for potential buyers. Though they were shopping for buyers previously and reportedly verged on a deal with Google that fell through in the 11th hour, the once-great pioneer of online payment processing is back on the streets looking for suitors. On the top of that list was Square, but they passed on the deal because of either too high of a sticker price or because they just don’t see Braintree as a viable acquisition. However, as a close second place runner up, they are reportedly still talking with PayPal who was formerly the essential monopoly holder in online payment processing.Part of the trouble Braintree is having while shopping for buyers is that they are asking for $1 billion dollars for the keys to the kingdom. Both industry experts and brokers form the former deal brokers agree that this amount is outside of what’s considered realistic, which has stalled out the previous two talks and subsequently squashed the deal. Furthermore, only a handful of companies including Square and PayPal have the bankroll to fund such an acquisition, and the number of companies in that area of commerce is very small.
The largest selling point that Braintree has going for them is that they still handle over $10 billion dollars in transactions each year. At an average of around 3% per transaction, which is the approximate industry standard, the buying company could expect to recoup their investment sometime between year 3 and 4 of their ownership. Also, with everyone making a power grab for the top spot in mobile POS apps and credit card processing, Braintree brings along a whole slew of new users that are ripe to by exactly what someone in the same line of business is offering.
Regardless if PayPal pulls the trigger or not, Braintree always has the option to circle back with a lower sticker price to try to make a deal with either Google or Square; not to mention Intuit which may be a viable buyer. While you have to expect there to be some reluctance to buy at $1 billion dollars, you are also buying first option at that price. While it’s unlikely to sell at that price, most analysts agree that they will get somewhere north of $800 million when it’s all said and done.